ft E S. fT R ; Cr E

Report No. TO-392a

This report was prepared for use withini the. Bank and its affiliated organizations.They do not accept responsibility for its accuracy or comp!eteness. The report ma,not be published nor may it be quoted as representing their views.

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CAT1TLE DEVELOPM:ENT PROJECT

PARAGUAY

December 4, 1963

iiepartment of1 Teclnnc.ical Ovperations

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CURRENCY .EQUIVALENTS

1 'U. S. dollar = 126 Guaraniaj 1 = U.S. $0. 008c$ 1,000 = U.S. $7.-94¢ 1,000,000 = U.S. $7, 936. 50

P A R A G U A Y

CATTLE DEVELOPMEDNT PROJECT

TABLE OF CONTENTS

Page No.

SUVlYMARY *0 o e @ t * o * * *9O * > p * * 9 i iiiJ.

I. INTRODUCCTION . . . . . . . . . . . . . . . . . . 1

II. BACKGROUND . . . . . . . . . . . * . . . . . . . .

III. SCOPE AND NEED FOR CATTLE DEVELOP14NT 3 . . * 3

General .. "... ,,,,........ 3Present status and Production Methods..... .. )4Potentials for Increasing Efficiencv ....... 5

IV* THE PROJECT . ,. . . . . . . . . . .. . . . . . 5

Gieneral . . ..................... 5Description of Project.......,,*,....... 5Cost Estna...... 7

Orgnnizati on and Managen-ent; = @ v; 9Marketing.. .... ... tnnM *n ----------- *** Q 11

V. BENEFITS AND JIJSTIFICATION . . . . . . . . . . 14

Increased Ranch Production............... 14Eco-no-ic^ Be-nefits.v--ee@*@@*- 1! 1.

VIo CONCLUSIONS AN]) RPlYflflMivfTATTCTl? , . * . . . . 14

ANNEXES

1. Ranch Size Dis-bribution

3, Ranch Development Costs4e Ire-Deve"LopmenrAt Productions St-at-ist-ics5. Herd Development Program6. EstiUmates of ProductionU Income and Operating Costs

P A R A G IJ A Y

CATTLE DEVELOPMENT PROJECT

S U M M A R Y

i. The GoverrLment of Paraguay has requested a development credit cfUS&r3.6 milli.on to help finance a three-year phase of a cattle developmentprogram. The cost cf this phase which comprises loans to producers forranch development, the importation of machinery for contractors to undertakeearth tank sinking and the employment of f'oreign technical supervisoryservices is estimated at di 731 million (US85.8 million ecuivalent). Theforeign exchange component is estimated at about USw2.7 million equivalent.

ii. All Bank nmssion reports on Paraguay have stressed the importanceof th. nt.tfl P . ndm.qftrv f.n t.hp nqti rnql P1rnonvni The nount-ry nsnnnorts he1f

cattle variously estimated at 5-6 million head. Local consumption absorbsabout two-thirds of the arnnual kill and the balance is nexprt+. mainly i.the form of corned canned beef, meat extract, hides, meat and bone mealsand horn. Is ring the last wo years beef exports h a TJS' l10

million annuLially and have accounted for 30-50 per cent of the country's

iii.LS Production ,,iet.h.ods. in us LIiUe Carte h.iLg luJY,y i n e ±L fficient M,Liainl.y UL,e to tIh

absence of fencing, adequate water supplies and efficient facilities forstoc ha igD As a r 14- ann-ual1 t-u n-c"f is 'owv c' qotl sh.h~L,L.r~ i~.IUJ.±1~, is resu L~U -.ULL .± L ). I± lb. IUW L...L LIU L±.L. -Lb 1.,

maturity is retardedc, and there is a lack of disease prevention and control.Ranch development programs under the pr-oject would be comfined to theprovision of basic f'acilities such as fencing, water supplies, corrals,dips and similar stock handling requirements. Sucn programs wouid progres-sively increase annual production over a period of 12 years after invest-ment up to double its original level.

iv. The borrower of the proposed credit would be the Government ofParaguay. T'he Central Bank would act as the agent for the Government indisbursement of the credit and the project would be administered by acoordinating Committee established within the Central Bank consisting of asenior representative of the Central Bank as chairman, a representative ofthe Nationa:L Development Bank (NDB) andi a technical livestock expert to berecruited.

v. Technical services for the appraisal of ranch development plans,for supervision of expenditure of the approved loans for ranch development,and for investigations on the financial standing of loan applicants and onsecurity offered by them, would be supjplied the Committee by the TechnicalDivision and the Devrelopment Branch of the NDB. Disbursement of approvedloans to ranchers and collection of repayments would also be undertaken onbehalf of the Central Bank by the NDB which would retain annually from itscollections a service charge of two per cent of the amount of loansoutstanding as payment for the services suipplied by it to the Central Banlk.

44

vi. The management of the Central. Bank is competent. For purposes ofbLJ.e projectb a i r s S t±- ± 'f IrIUer-.L_ WUUlU. Ub CtJOJ4IUeU D UIIp UL4a as 0 L JA ICr-

sentative on the committee to administer the credit. The TechnicalDI-Vision aniu lAke DUevelopmeUInvranc of. le QIJD UuI iur.d lthe direction o

competent officials and are experienced. in the appraisal and supervisionof agricultural and stock loans. They should be capable of satisfactoril,yproviding the services required of them by the Central Bank.

vii. The project would cover development of about 150 ranches.Approximately 75-80 development programs could be formulated annually andeach would take about one and a half to two years to execute. Disbursementof development loans therefore would spread over about three and a halfyears. As the present contracting force for developing water facilitiesis restricted, the project would includ.e its expansion through the financ-ing of two additional units for contrac.t tank sinking.

viii. Loans in local currency for 80 per cent of the estimated cost ofapproved development programs would be made to ranchers for a term of 12 yearsincluding a grace period of 4 years and at an interest rate of 9 per cent.Loans to contractors for imported machinery would be at the same interestrate but the term would be shorter (3 to 5 years) and the borrower wouldcarry the ex.change risk. The technical. livestock expert would be satisfactoryto IDA and would be employed for the pe!riod of disbursement of the credit.

ixo The development credit would cover the whole foreign exchange costof machinery for contractors, and of the expenses of the foreign technicalexpert and 60 per cent of the cost of approved ranch development programs.The Government would provide 20 per cent of ranch development costs.Borrowers would be reauired to provide the remainder from their ownresources.

x. The interest collected on loans would be used fo-r payment of theRervine charge o f th.e NMnR- thp sprvi Ge charge of TTA the costs of theCentral Bank in administering the proje!ct and the balance (about 5 per cent)would provide some cushion naginst the foTeiagn echang riqLs on loans toranchers. Irincipal. repayments would be used for relending to ranchers toc-ontinule cattle development.

xi. The possihbility of providing assistanfce to Paraguay for catt.development has been under consideration for some years but the Bankindicat+ed +ha+ rel aation of rarketing controls in the direction of freemarketing and the solution of other organizational problems was a pre-

,,n,4

e .a+..4+~nn -AAr.+ An nf An,An ., + l,f Pa 1,..rnci.s c nIequ.s t itsL Q coU .U i der,a+. of fUt I a -l -assis+n c . Follow a repor

of a Bank mission to assist in revisingr the marketing system, a new decreewo . . .. A44 4 5v- AA_AA. b .s _ ~'J ± 1 A± ui D a.~j .,|~~~~~~~~~~~~~~~~~~~~~o Cs CJG_L G.W1',V'- V sGzGU st~vQ|VsV Ussw WVA JVU. Cl%D VL& I C" CLSUCXy

de Carnes which previously had monopoly control of marketing. While thereare reservalt.ions Cassto the exAent LI WLhIc.h. tUh neVW o izaLAtio.LUII mUtsV0

ultimate reouirements, the changes represent a substantial move in thedirUection o1.14. li.± -aLi.g eU Le± pI.icesI U a UI1Ud Uordi LIo inI UtII irUU.Ld-ty andU

in providing incentives for investment in cattle development. Ranchers,previously disinclined to invest either in capital improvement in their

properties or . ben ++er nagemen no; nrxo +o participatin development programs if credit on suitable terms and conditions such as_L.LJt: jJ. ..J;J e :%A U.LLn.L L. F.J.LV UJV _J .A 4

ALJ. .LIL1t; &.L ; Va.Lue of ±l L'd: LL ;: iLIUdsL kJ.L U JUU.LJL1 .LOU.L.LL11, JAL VL4

project is estimated to rise progressively to a maximum of 0 238 million intLle Owtwe.L LfJ.1 y-ear follow-iLng _.1Veslt1mul,* TLLIe increased arnnu1a' opJert± dJ.gL±,

expenses a.re estimated at V 42 millio:n and the net value of the increase in~~I ~ ~ .4 ii ~~~ _ -~ A 11 9£-- .LL.. 2 I -- --. 4 .anruir.-u production gat yi 1701J 1IrLiULI. Ji.L±LUW±Ul AV1- loit UfoVr the Vj)elop,1 period ofi

12 years following investment and computing annual net benefits over theliietime oE the project - 30 years - the average anunual ret-u-n to 'hiieconomy at farm prices would be about 14 per cent.

xiii, The project would improve the competitiveness of Paraguayrs beefproduction and assist the country in expanding its exports. It is soundand economically justified and would be suitable for an IDA developmentcredit of US$3.6 million.

P A R h L _ U A YL

CATTLE DEVELOPMENT PROJECT

I. INTRODUCTION

1. The Government of Paraguay has requested assistance to finance athree year phase of a cattle development program. The cost of this phase,which comprises loans to producers for ranch development, the importation ofmachinery for contractors to undertake earth tank sinking, and the emplo;ymentof foreign technical supervisory services, is estimated at 0 731 million(US$5.8 million equivalent). The foreign exchange component would be aboutUS$2.7 million equivalent.

2. The credit sought is US$3.6 million equivalent. The borrowerwould be the Government of Paraguay. The Central Bank would act as agentfor the Government in disbursement of the credit and the project would beadministered by a Committee established within the Central Bank consistingof a representative of the Central Bank, a representative of the NationalDevelopment Bank (NDB) and a foreign technical expert to be recruited.Under the supervision of this Committee, required technical services wouldbe provided by NDB which would also undertake the disbursement of develo:omentloans to ranchers and the collection of loan repayments on behalf of theCentral Bank.

3. Following discussions with the Paraguayan Government on cattledevelopment dating back to 1959t Bank missions visited Paraguay in May andJuly 1963 to appraise the project. The foilowing report is based on themissionst findings and discussions with Paraguavan authorities.

II. BACKCPOIND

The po-ssbility of provirling assistance to Paramay for rattledevelopment has been under consideration for some years. Commencing in1959 neveral missions have visitPd the nnnntrv tn i"vP.-ti 2t thispossibility but little progress was made primarily because of the unsatis-

faForrmanytyears, cattle mark ettng hesbeen und er monoppolyconrloan official organization, the Corporacion Paraguay de Carnes (COPACAR). Asfar back as l9592 th>e Bar.k indicated thatv rel^ation of marketing controls inthe direction of free marketing was a prerequisite to its consideration offinancial assistance for development of the industr. The Bank offeredhelp in revising the marketing system.

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6. In consequence of the report of a special mission to this end(williams/Wilson report on Cattle Marketing and Price Controls, February 196.0)a new decree law for the reorganization of Copacar was enacted in 1961.While the Bank has reservations as to the extent to which the new organizationmeets ultimate requirements, the changes represent a substantial move in thedirection desired and provide a climate in which financing of cattle develop-ment can be considered.

7. By 1961 too, a new National Development Bank (NDB) was establishedin Paraguay with financial and technical support of the Inter-AmericanDevelopment Bank (IDB). The NDB has included loan assistance to cattleranchers as part of its activities.

8. F'or many years cattle ranchers had been disinclined to investeither in capital improvements in their properties or in better managementpractices. This attitude resulted from the unsatisfactory organization. andeconomic aspects of the industry. and is partly responsible for the very poorstate of so many ranches.

9. However t,he picture has changed materially during the past 2years, in consequence of the liberalization of cattle marketing in thedirection of free enterprise and the establishment by the Government of amin7hnum basic price for cattle at a rrofitable level,

10_ Ah Pviripnp off rnrrRnt intprARt- a total of 77 loan applications forranch improvement estimated to cost 0 2411 million have been processed on thehasis of apnproved developmlent program: by the NDR, Programs totpl i no

/ 170 million have been approved. From 5.0 to 60 per cent of this cost,,representinig the foreign exchange componi-ent, has been made available by IMP

as loans repayable over five years with interest at 10 per cent. Thewan v hci e Sonner-ne h1avro been reap- drew +^ Qi,vn?v r +hem h'n nr,e- vn>ron+ in +Jic:. ~ LI _S, L.s sA AA..f. *I.t ¼ v ^ t s the. . _ S £ ¼.s L..L, _ -

case of smaller units, (on units below 5000 ha the NDB has provided up to20 per cenl; of l-nn' currncy needs). 6 IA.A 1 av beer. +ake"n up, IL

further 30 loan applications are in the process of examination. These willpractuicallr coL.LJit l INDB f-1ds po-- bA-uy the .IDB T avalable fo finalr.

ranch deve:Lopment.

110 As further evidence of the improvement in the investment climate,on e wag oma-Ia ^,etda, ave:ragi.3 of di 15 :--io ar-nl- 4ui; h

past three years onI ranch improvement. It plans to continue this rate of±nvestm'ent prvuUgIh cooicii situatiLon of the ±indusvx-y does not chdflge

substantially. There is now little doubt that other ranchers are ready toparticipate in development programs if credit on suitable terms and conditionlsis available.

12. It is claimed by the Rural.Association representing cattle ranchersand the NDJ3 that many tenitative applications have not been proceeded witnbecause of the exchange risk aspects and because of the inability ofborrowers to provide the iarge proportion oI the development costs from

private resources that has been required. All NDB loans for cattledevelopment involve the rancher accepting the exchange risk. Thepossibility of devaluation of the Guarani because of economic pressuresresulting from devaluation of the Argentine peso combined with specialreluctance to accept exchange risks since only about 25 per cent of anyrancheris output is exported have continued to make potential borrowershesitate to accept :NDB assistance. Thus 11 ranchers have not taken upapproved loans totaling V 27.0 million. Furthermore the repayment termspossible for loans granted from I3 funds are considered by prospectiveborrowers to be unsatisfactory for financing development whose benefits takeseveral years to materialise.

13. The IDB financial suppoit to the NDB was designed for generaloperations and not specifically for cattle development for which the funisit could allocate were too small to make any considerable impact.Additionally it is not keen to become further involved in specialised aspectsof agricultural development such as the Cattle Development project whichrequires specialised supervisory staff. The IDB has therefore expressedthe view that it woulld welcome the entry of IDA into this field.

III. SCDPE AND NEED FOR CATTLE DEVELOPMEfiT

General

l4. All Bank mission reports on Paraguay have stressed the importanceof the cattle industry to the national economy. The country supports beefcattle variously estimated at 5-6 nillion head. Beef is a major item in thelocal diet (60 kilos per head per annum) so that local consumption absorbsabout two-thirds of the annual kill. The balance is exported mainly in theform of corned canned beef, meat extract, hides, meat and bone meals and horn.During the last two years beef exoc)rts have averaged USt1O-12 million annuallyand have accounted for from 30-50 per cent of the country's export earnings.

15. By far the greater part of Paraguay is used for cattle raising.The Chaco zone of the west, accounnts for approxnmately 60 per cent of thetotal land area, and is used almost exclusively for cattle ranching. It isunlikely to be iiuaIle for nny other purpose for a verv lnng time. TheOriental zone of the east supports a little more than half of the cattlepnnni1qt.ionn annd simihr1xr no significntn. change ls llkel in the use of the

specific lands concerned.

16. The number of cattle owners is recorded as approximately 150,000but the great -ajor_iy of these own so few, head of stock that they cannot beconsidered in the category of ranchers. Approximately 1,500 ranchers ownf4ro.. 500-_5f,000 h4a wi tih an average hInerd size. of f500 head, A 4urther 500A

control properties ranging from 5,OO0O-50,0 ha in size carrying an averageo-if 5,000" he-ad and accounting for appoxmael -- per 4 cetf 4the 4-4-l

cattle population. With the 1,500) smaller units, they control 70 per centof Ulte nationdi1 herdl (tLUItA 1)J*

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Present Status of Production Methods

17. The production methods in use are highly inefficient. Many of theranches are unfenced and cattle management is that of the "open range". Evenwhere boundaries are fenced, cattle are grazed extensively in large mobs onnative pastures either not subdivided at all or with but two to four fields.Insufficient waterholes in association with the absence of subdivision areresponsible for very poor utilization of available pasture which is eithErovergrazed or virtually unused on a large part of the ranches. Cattle have towalk too far from water to use availabLe feed fully. This problem is themore acute the larger the property and is especially characteristic of theChaco zone. Few improved pastures exist and those that do represent aninsignificant fraction of the property concerned. Facilities for handlingcattle are often grossly inadequate. Almost all the more serious cattlediseases exist and their incidence is widespread, although the Chaco zone isrelatively free from tick carried diseases. Even taking into account thelimitations imposed by climate, which is subtropical, stock quality isunusually poor for a country where cattle production is the major industry.

18. Even the most elementary management procedures essential toreasonable efficiency must be based on adequate control of stock of differentsex, age, and relationship 0 This is imposSible under prevailing conditions.Inadequate handling facilities make control of disease virtually impossible.Stock quality cannot be improved by seLective breeding with no effectivecontrol of rnating.

19. The net result is a low leve;L of efficienc:v The stonkinp rate isof the order of one beast (mixed age) per 3-7 ha. Effective calvingpeenrntae.s are lw andr averrnage iintein- 1n per c-ent of coiws of hrpdrlina aoe.-

Because of dlepressecd growth, heifers do not breed before four years of age andrarely have mrore thn t+wo calves every four years. Calving tends to bespread over the year instead of being concentrated in spring months as iEsnecessary for good growth<, Early calf mortality is high at about 6 per centand continues high cluring the rearing period. Weaning does not take placebefore one year of age M.nA -11- are o .- n e+ a11+ froo+ -hen + hen ex+t fis born. Cows are slow to recover and to return to breeding condition.Growth rate of weaned ani mal s is slow, ki llable weights of 30rn-).00 ki;l os(live) not being reached until 4 to 6 years. Annual turn off is low,averaging fr.o, 10=l1") per- ceant of + he +o,+ he,-. Meat production per hectare

is of the order of '; kilos dressed weight, About 60 per cent of the animals

cows averagilng 300-320 kilos. Dressing percentages of the two types average52L p er c rt d-U L 4 per cent respectivte:Ly. At sLautr a.ll c.t.L e are

exceptionally lean, so that irrespective of other limitations to export asvA_ G _I n]k i sI __ sv| 1 _ ___1- - -- -44 A 4-- r- -- -TAfXrozen or ch illted bete'eXf Uth.vy CUa r OsAL% U1A oUnly to CUannin. BeUCa Us 1hig;

gel and low fat content and since the whole carcass is available they arespecially suited to this purpose an.d the canned product is of hIgh qualitye

Potentials for Increasing Efiiciency

20. Lines of attack are clearcut. Improvement must be sought in theoverall stocking rate, the effective calving percentage, the survival rate,the rate of growth, the dressing percentage and the percentage turn off.

21. Inprovement in stocking rate can come from more effective use ofavailable native pasture through subdivision and water provision. Overallcalving percentage can be improved by separate and better rearing of youngfemale replacement stock to permit earlier and more reliable breeding, bycontrolled calving and by earlier weaning to encourage earlier return of cowsto breeding condition. Survival rate irnprovement is geared to better diseaseand general managenment control as also is improvement in growth rate ofgrowing steers. I)ressing percentage and sale percentage increases mustfollow better feed use through improved rnanagement. Stock quality improve-ment will follow as a natural consequence.

22. Even small improvements in each of these directions are capab].e ofmaking substantial contributions to output. While their attainment wouldonly be reached progressively over a period up to 12 years, it should not bedifficult to increase the breeding herd and overall stocking rate by 50 percent. to lift effective calving rate 1Dy 25 por cent, to increase killingyweights by 40-50 kg per head to 400-4:20 lcg (or 15 per cent) and to liftdressing percentage by two to three per cent (to increase the yield of rneatby 5 per cent). The proportion of the herd sold could readily be raised by50 per cent (10-12 per cent tc 15-18 per cent). The combined effect ofgains of these dimensions ultimately would be to increase total output perranch by alproximately 120-150 per cent.

23. Phat such inereases are within the canacitv of averape managernentunder the simple project proposed is indicated by the performance of a smallnumber of ranches wNiere a similar developDment progrrnm has been in onpera-ion.In such cases, where management is above average, stocking rates have beenlifted by lOO per c-enn to one beast per two to three hectares; calving per-centages have been raised 50 per cent to two calves per three years; weightsat. ktillin have mlrov.dA to L.30 ,g avrage anrd the proportior of the to-talherd turnedl off annually has been raised to 20 per cent.

IV. THE PROJECTv eir, e - 2 -

24 The project is a three ye-r phase of a attle development programwhich includes tne extending of cr edit to producers for ranch developmehir,the import+ation. of mach.ery for cor.tract-ors to u.ndert+ake earth.A tank sikand the provision of technical supervisory services.

Description of Project

25. The primitive state of the cattle industry limits any developmentprogrami at this stage to the provision of facilities basic to rational cattlemanagement as the f irst step toward increasing efficiency. While a fewfranches are reau'y 3or a more auvai-aeed program irnvolving iriproved artificiaalpastures and better quality sires, the vast majority are not. The projectis thus a simple one involving the on-farm development of sucn basicfacilities. These are:

aO subdivision of the larger properties up to a minimum of10-20 paddocks (of approximatel-y 1J0uu ha eaeh) topermidt adequate and separate control of the grazingmanagement of young stock, bre&ding stock, and fatteningstock;

bo provision of associated water supplies (dams, waterholes,drinking pAaces, troughs, windmills, pumps, according tonenditions) to each new subdivision with the majorobjective of increasing the overall use of existing naturalpastures;

c, development of adequate stock handling facilities such ascorrals, drafting races, crushes, dips or spray baths topermit management control of all classes of stock and toenable disease control by dipping, vaccination andtreatment.

26. ]:n order to have maximum impact upon the national output, theseimprovements would be channelled in the direction of those ranches which arein the economic size range of about two to four thousand head of cattle.The project would cover approximately 15C) such ranches. Assuming a sampleof 80 small ranches with 2000 head, 5( medium with 3000 head, and 20 largewith 4000 head, this would cover approximately 30 per cent of all ranchesover 5000 ha in size, and would involve approximately two million ha carryingabout 400,000 head of cattle at the present time. Essentially the projectshould be regarded as a "pilot" one. which, if successful would provide asound basis for extending development. Details of the developmentobjectives for the three sizes of ranches are shown in Annex 2.

27. A technical livestock expert satisfactory to the Association would beengaged by the Government to supervise the administration of the project.Developmental plans would be prepared for approved ranches; and loans of upto 80 per cent of the estimated cost of the works would be made. The ownerwould hr reqnired to sinnly in c-ash or kind t.hp remnining 20 npr cent. thisbeing the maximum proportion it is consicdered the average rancher couldprovide from his oun resources- The development woiuld be supervised andtechnical advice on stock and sanitation management-would be provided.

28. Some fencing and building of corrals would be done by the ownersand their staff as part of their 20 peracent contribution of cost and somewould be contracted. Water provision would be carried out by experiencedcontractors, The existing contracting force for tarX s-nkin (t.er o

contractors operating in this field) would need expansion to approximatelydouble its present capacity. Provisi.on is made in the proje^t for theimport of heavy machinery for this purpose.

29. Formulation of individual farm programs would be spread over twoyears. Since it is doubtful whether loccl admiistrative facilities cculdprepare more than 70 to 80 farm programs annually, and their implementationwould tMake at least two years, the project woul'd spread over about three andone-half ye!ars.

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Cost Estimates

Yn. The estimated cost of development for each class of ranch is setout in Annex 3. These estimates have been derived from examination ofrecords of the NDB in operating cattle development loans. They have beenchecked against contractor prices and the costs incurred by Liebigs, one ofthe larger foreign meat packing and ranch owning companies in Paraguay, whichhas been actively engaged in a similar development program over the pastthree years on 13 ranches.

31. The cost estimate of the project is as follows:-

(million Guarani)

Ranch Development Local Foreign TotalCurrency Exchange

Fencing 260 130 390Water dams and tanks 45.5 107 152.5Drinking yards 17.5 41 58.5Corrals 45 45Dips and baths 27 18 45

Total Ranch Development 395.0 296 1ZI' 691.0

Machinery for Contractors . 27 J 27

Technical Services and transport - 13O V 13.0

Grand Total 395.P 336.0 731.0

US$ equivalent (millions) 3.1 2,7 5.8

3° Fencingacort fori +-he g-reater paort. of +i the -An dee opm- r-cs.-

The length required will vary with the stage of development of each farm, itssize and location. Farms in the Oriental zone will probably requireapproximately 40 per cent less fencing than those in the Chaco. The lack Ofrelliable sta ti-stics , ra Paraguay tr.mal it ir.nrnsill t o forecas+ requre - me:t+s

with accuracy. The cost per kilometer is affected mainly by the lab6rcharge which, on. a n cont+ract basis am0.ounts too A per cen'f + the +ot,awhen the labor cost of cutting fencing timber is al1bwod for; Most ranz4heshave sufficientv fencing tim.ber on te4- property bu' require labor for itcutting. The cost used in estimating is an average figure derived frot thesouces men'ioned in, para 30 he foeg.exch-rge contentV. of feningLir :tapproximateLy 33 per cent.

33.e Stock water will be provided by building dams to collect run-offin the Orientl zone and bUy excavating water ho'es or taUnks irn u t urheCao zone.Costs are similar anld based on the ruling contract price per m3 (50 %) and an

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average size unit of' 5,000 m3. One unit is allowed for each two subdivisions.The cost of associated drinking yards :Is similarly derived. These will beexcavated timberlinecd access sites to (lams in the Chaco and troughs in theOriental zone served by pumps or wells, On the basis of the foreign exchangecomponent in the earth moving costs determined for the Paraguayan highwayproject the foreign exchange component of water development costs will beapproximately 70 per cent.

34. Corrals will be built by cont;ract labor from materials, exceptinghardware, existing on the property. Spray baths have been charged at theimported cost plus erection by contract labor and dips at contract prices.The foreign exchange content of corrals and dips is negligible (ironwareand cement only) and that of baths approximately 80 per cent.

35. Contractorts machinery would consist of a crawler tractor withbulldozer and carryall, an agricultura:L tractor for haulage, a 4 or 5 ton.trailer, a four-wheel drive truck and a small mobile workshop. Based oncurrent quotations, a medium powered pLant would cost us615,ooo equivalentand a high powered plant about US147.(000. The project provides for theimportation and utilization of one mecdium and one high powered unit.

36. Provision is made for the sa:lary and expenses of a qualifiedf_ P-'rrn tecrdninnl expert t.o bh Pmnlnupd nver the three nand a half yearperiod of disbursement of the credit and for the purchase of vehicles forg7roundt- ±.r~n.'pnrn ovf t.echni ral staff.

37. The proposed mA credit ofP S3.6 , o w cover the foreinexchange costs of contractors' machinery, technical services and transport_aL nd An p r-r uet o.FL t1h cost of ; rn-11 evelloamen.t A1 | h^e h; ) hCX-'- '-V ^ .±t W. J.L V ~ U ' .,iJO U V L I. 044t,4 '... V W.L.J.ItL±± 394 VJ5A C4L{ flA 'UflV IA

6SS iS. 6 iJ

than the estimated foreign exchange cost of ranch development programs,foreign finr,in 4of -thiorer would ';e .eurdunder -'evailng con"iton.-

38. Ranchers pro-vide n cash, labor or MLaterials 20 per cent of thecost of the developmiental programs. This proportion is reasonable inrelation to te resources avail_ble tV t1hem.

39. The remaining 20 per- cent of the cost of developmental programswould be advanced to ranchers from local currency funds provided by theCentral Bank from its collections of amounts owing to the Government ownedBank of Paraguay which is in liquidation.

40. The amount of outstanding loans due to the Bank of Paraguay whenit ceased business totaled -J l.6 billion. A review of these loans indicatedthat some X 700 million were collectible, g 200 million were probablycollectible in part, and g 700 million were uncollectible. The Central Bankis undertaking collection on behalf of the Government. Some X 120 millionhave been collected to date and paid to the capital account of the NDB. TheNDB is entitled to select additional securities from the portfolio of theBank of Paraguay to the value of 0 :380 million for collection. As much ofthe balance of the portfolio as is practicable will be collected by theCentral Bank. Its collections are currently running at the rate of about0 80 million annually and appear to provide the source of sufficient local

- 9 -

currency r^un(is for the public contribution towards the cost of the project.In addition, the Government would undertake that local currency fundsrequired for the project would be made available promptly as needed.

4l. Disbursement of the IDA development credit would be directlyagainst documents in respect of importatiorns of contractors' machinery,vehicles for transport and payments for technical services. Disbursementsfor ranch development would be on the basis of a percentage of the amountsloaned for this purpose.

42. Thef Central Bank would provide the NDB with funds as needed fordisbursements of loans to ranchers for 130 per cent of the cost of approveddevelopmentaL progranms. The Central Bank would obtain reimbursement fromthe IDA deveLopment credit of 60 per cenlt of the cost of these programs, crin other words 75 per cent of the amount disbursed by the NDB to borrowers.Interest and repaymrent instalments on the loans collected by NDB, less theNDB service charge of two per cent per annum on the amount of loans out-standing. would be remitted to the Central Bank. From these payments, theCentral Bank would recoup its costs of administering the project (expectedto be less than one and a half per cent) and meet the service charge on theIDA development credit. It would use the balance not currently required torenav the credit; as a revnlving fund to continue the cattle developmentprogr-im A rnargin of about 4-3/4 per cent between the interest rate chargedto horrowers and the total ervinie charge would provide some cushion apainstthe foreign exchange risk borne by the Government.

43. Development; loans to ranchers would be for a term of 12 years in-cluding a grace period of 1 years bt-h .r.+erest at the rte of 9 percentper annum and with the Government carrying the exchange risk. Limitedsources for long-te+nn,. develor.,

4-ent loanns ex-1Dst n;r Pa y +tIh prera.t

time. Loans for short-term requirements carry interest rates of 12 percen+ -_w-rds Thne te..,.s 4and- LJiitL.-i.f 4h1 -- oe ------- Al oans

under the project would be satisfactory and not disruptive of existing patterns,

44. Loans to contractors for the CO.I.F cost of imported machinerywould Luue Ifor a shLUrt U.L U.Ll - 3) UV 5 yes.Li - at 7 per, c,tIU andA Uth borroe

would be required to carry the foreign exchange risk on his loan.

Organization and Management

45. The project would be administered on behalf of the Government bythe Central iBank, operating through a coordinating committee establishedwithin the Central Bank. The committee would consist of a senior represent-ative of the Central Bank as chairman, a representative of the I'wB and the!technical livestock expert to be employed under the project. The Committeewould be the authorized body to approve loans to ranchers for developmentalworks and loans to contractors for machinery imports for dam building andtank sinking,

46. The NDB, through its Technical Division, would supply technicalservices, supervised by the technical livestock expert, to investigate andreport to the Committee on ranch development programs submitted for financingand to supervise the expenditure of approved loans. The Development Branch

- :L0 -

of tne hvB would obtain and suDmit detEais Of tne f inanciai standing O0applicants for loans, would investigate! security offered and would obtainmortgages in. the nam.e of the Central Bank. Disbursement of approved loansto ranchers and collection of repayments would also be undertaken on behalfof the Central Bank by the 1OB who woul.d annually retain from its collectionsa service charge of two per cent on the! amount of loans outstanding inpayment for its technical and banking services.

47, The Central Bank of Paraguay is a government-owned and operatedinstitution forming the apex of the pyramid of financial institutions inthat country. In practice it is largely limited in its activities to financ-ing the requirements of the Government and of state economic enterprises.The Board of the bank consist of five members, all of whom, including thepresident, are nominated and appointed by the Executive Power with theconsent of the Council of state. They are required to have competency inbanking and economic matters and to hold no conflicting interests orposition. The current management of the Central Bank is strong and sound.For purposes of the project it would appoint a senior member of its staffas its representative on the coordinati.ng committee.

48. The National Development Bank was established by the Governmentin 1961 as a. successor to the Bank of Paraguay whose cumulative unsuccessfuloperations resulted in its liquidation. The general purpose of the NDB isthe intensive development of the econonv by promoting and financing programsand projects of development in agriculture, industry and commerce. Its mainfield of activity is short and medium term credit to commercial farmers.Commercial banking and credit operations uith small farmers and industrialistsare segregated from other operations. The M\B has a large deeree of autonomyin its operations but the Government is committed to make good arn lossesfrnm nredit onerationn wvi th Tsmall f.;rmprs and irirbnitrinliqt-. The hanklqexternal organization comprises 29 branches and 38 agencies.

49. The Board of the NDB, consisting of 8 members, is appointed bythe Government and is drau-m, from both t.he pub ,ic a nd private sczto

cluding four members representing Ministries or agencies of the Government.Alocal representatiera of +he Ter+.vAmeric_n Developrmnr+ BanLk -. hih has

extended a loan to NDB, strengthens the organization as technical consultant.The staff consists of 120 personnel selected on merit from the 1,000employees of the defunct Bank of Paraguay. As a result the level of-4 ,i sl ral-on routine -- --eas sat4--.4fator b,ut because ofP its only recentestablishment, the bank's capabilit:ies for the exclusive direction of majorprojects iLs as -et --.prve a14ho--l^. its record lo 'ale 4s not -npr 4,i-ngCL U 1J1 V-1 C1LLV V .1 Lk. tAJJ.. A U.0U .Lo 1L'. U LJ.JJ± JLILLO.LLiI,

0.~~m TiL-e Technical DiLviLsior. ofL 114JI was estab_lishedV "in early 1962C to

untlertake appraisal and supervision of agricultural and stock loans. Itconsists of'b 9 7ec lLiical officers who adLre: O-W eAptrieduIU an l .1pe1 i

their duties, The number would be increased for purposes of the project.The procedures under which they operate ar;e soundly based though somewhatcumbersome. The foreign technical expert would advise and assist this staffin extensiorn services to borrowers on stock management and sanitationtechniques. The Division would be a suitable medium for the appraisal anddirection of ranch developmental programs.

- Ul -.

51 LThe Development Branch of NDB is under the direction of anPenpr;i PnPed cpnnhlb le ffir nial_ A revrirq.T (-r ;t. ivrrp+t. nr.in + nrii-

cates that it could satisfactorily carly out the responsibilities allottedi+ n+Vund_r the project p-o poals.

52. ~~Su.ppli-1es of' P fen.n w-r -he iron truhig pip4 ng -d otheI*'~~ JU.kJFJ..J.L UL .5. A - 1 WVVLJ. U, t .LA4 J .L UUV~WA11J..LAr. J._Lq..LJE

5~1 WV

materials required for ranch developmerLt are available from more than oneduozen fi r-,-s estuabli sh1 ed in Plaraguay . _L, - ewe them,, mport4 fro 6- 4f t.hU.IUi.L LiID V .±1~L L dL c" %UCLY WLIIU, V~LWU l uil1IL .LAILJ9I.J. il£. Jl UL VAA 'LI

main countries manufacturing these commodities. Borrowers would be freetuo procure theirl UrUU.L ,-A,t uJJUJr.der L.±VIIl pLli fUrour uti V. ofthi:.LL

choice. Importation of heavy machinery- would be restricted to makes forwILIchM eflfc.cient . ; aLerflb bluVJ;d.U spare pbs fac.LUtie hIave~ ubeei tvUa±."

in Paraguay. At present only two firms - Caterpillar and InternationalHarvester - fulfill This requirement. It is doubtful if the quantity ofbusiness available in Paraguay would justify the establishment of additionalfirms in thi.s field. Improvement in importation procedures has recentlybeen effected by the Government followi.ng a survey conducted with foreigntechnical assistance. Importers informed the mission that the situationis now satisfactory. The Government would. undertake that materials requiredto implement the project would continue. to be permitted to be imported freely.

Marketing

53. Prior to 1961, cattle movement and marketing and cattle and meatpricing policies were rigorously controlled by Copacar which was establishedby Law Decree No. 2810 of March 6, 194iL. While nominally a cooperative,Copacar became in practice, as a result; of Government appointment of thedirectorate, the medium through which CGovernment policy was implemented.The objective of the policy was to provide ample cheap supplies of meat forthe populace of Asuncion and the arny. The restrictive practices adopted,however, had. the effect of discouraging investment and led to generalstagnation in the industry.

54. As a result of the Bank's recommendations, the Government reviewedthe condition of the industry and enacted amendments to Decree Law No. 2810aimed at improving the situation. Under the new law No. 710 of July 25,1961, the Copacar directorate was altered to consist of four producersselected by the Government from a p.anel. submitted by the Rural Association(an association of cattle owners) and two members representing the Ministryof Agriculture. One of the producer representatives was appointed Presi-dent of the directorate by the Government. The present Droducer reDre-sentatives were not selected precisely in accordance with the provisionsof this decree law but Rural Association spokesmen intimated to the Bankmission that the Association was satisfied. with the directorate and themanner in which it was oDeratine. The Government would undertake thatwhen the new directorate is appointed EIs required by law in December 1963,selection would be made in accordance with decree law no. 710.

.- 12 -

55. Since the appointment of the! new directorate there has been aconsiderable relaxation in the regulatory policies of Copacar. However,its powers remain substantially unaltered under the new decree law exceptthat its monopoly right to the Asuncion market and the right to imposesupply quotas on ranches are removed. The improved conditions in theindustry result therefore more from a change in the interpretation andadministration of the nowers vested in Conacar rather than from anyradical reduction of these powers.

56. In practice, cattle and meat marketing has been ccnm-iderahlyliberalised in the Oriental (eastern) zoe.r T\Tr restriftirn cn ca--le move-ment and no quotas on deliveries are set and producers are permitted to sellto any buyer. As a result most sales are to the free enterprise market andto export processors. In the Chaco (western) zone, however, producers arenot all owed the c freedm As a rel-+ o pf' ,acar -:- +ion to ensurethat it can guarantee supplies to the armx and Asuncion pj;pulace, movementof cattle from +he Caoico.rlebyp^t Thpoderhene ca

only elect either to sell all of his output to the exp.rters or 60 per centto Copaca<r a>nd thUL-e boalance tuo thL'e free ent-erpri4se marketoreptrs

57 . -oaa -a -broe -t plc- -of- fP-4ng r.eat prices fn-avc;r ofC.,I 9 '.)JJjJC.,OX.± i.LCXCO C.k.JOLIUUiIUU ±UO VJ.UL±kL0 J 04.L L A±iIL11 11k-d.u J.A 1 .Lk .~V-4 .4

setting a minimum price level for the domestic market, which is at presentd ' L er k~i .loU livewe±gigh for standard weights plus p±rJ-.iums up to -L-, 1. erkilo for cattle of heavier weights. 'Et is the price charged to the army.Mu- --. n. -Z -- it uZ - I-t Tne export Lndustry paid more than this price in 1961 a;du 196bc buu less in

1963 due to price fluc.tuations in the world markets The local frEeenterprise market pays at present from , 2 to y, 4 per kilo above the minimumrate. Copacar no longer fixes wholesale or retail prices. The privatesector has been given freedom in reta:il selling but Copacar attempts tohold retail prices at reasonable levels by the prices set in its owm retailshops. TheB price of cattle to producers has increased substantially uncderthe new arrangements 0

58. During 1'362/63, Copacar's activity in the total market hasdeclined considerably relative to past operations. Apart from 0,000 headsupplied to the arny, its purchases have amounted to only 45,000 or 712 percent of the total kill,

59. (,opacar levies a contribution -towards its share capital of , 4Oper head for every beast slaughtered for local or export trade. It isplanning to build a modern slaughterhouse to replace the obsolete unit lnowcontrolled by the army to hand.e the whole kill for Asuncion and the arrny.An ancilla:ry objective is to reduce hazards to human health by supervisedmeat in=pection, and to ensure out-of-season supplies by cold storage.This development could lead to controlled marketing again unless thefacilities so provided are made available to private operatorFsO However,under the new law determining its activities Copacar is ded:icated to theprin iple of free competition and is required to be transfoymed into aprivately controlled entity at the end of an unspecified transition period.

60. The Government would unclertake that no alteration in the exerciseof existing regulations or imposition. of new restrictions on the industrvthat could jeopardise the success of the project would be sanctioned.

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61. Owing to its geographical position, type of cattle and incidenceof foot and mouth disease, Paraguay is unlikely to develop a frozen orchilled beef exDort trade in the foreseeable future. Increased cattleoutput above domestic consumption requirements must therefore continue tobe sold as corned canned beef.

62. Data on international trade and prices of corned beef are limited.Total trade appears to be about 100,000 tons per year with the United King-dom (5n0nOn to 6

0jo000tonS) and the Unitte States (40,000 to 50000 tons)as the major importers. Argentina is the largest producer, supplying over4iO per cent of +.iTT United Kingdom trade and 60 per cent of the United Sta1-estrade. Paraguay now supplies about 10 per cent of each market. Australia,Brazil Jand Ke.-ja a^ccount for most olf. thIe balL.ce.J Recertly. Jrr cour.t3ie

have increased output particularly to the United Kingdom to which they~J . A~ p~-. '.,~IIU .1.11 J,7'.'J. ky0..1C.CU ~U V L o_. J L. lk~'-A L.~ IU ..LI I .~

;z~T~4 ~n .; *n n1 _. .; 1 + * i4 4A4 * 4-_ +>

corned beef from Paraguay at its present cost of 37 to 39 US cents per poundLSqU*e com-fpet-itive relatLive 'o o'Uh'er IatL -z-rlrcu supplie -n -_highly, _,iLs quiLte UiJ,±±~£±bV ~u ~iar .LLI J[-±UF dII.0C10JJPLL-- LI L ±~Ii.Lr1k.Y

competitive relative to those from African sources. It is not possible toforecast the effect on price oI a substantial increase in exports fromParaguay. If the national turn off of cattle increased over twelve yearsas a result oI the project Dy 50 per cent, tne quantity avalilale Lorexport would approxirmate 27,000 tons as against the current 9,000 tons.This would represent an increase of' 18 per cent in the present supply onthe major int;ernational market. However, as previously noted, the Para-guayan product is of high quality and this combined with the reduction inproduction costs that could be expected to result from the project, shouldenable Paraguayan exports to at least maintain their competitiveness.

64. There are three export packing companies operating in Paraguay,one of which is a local cooperative and two foreign owned. Together theyhave processed an average of 146,000 head of cattle annually over the last 5years. The two foreign owned companies have invested in extensive moderni-sation of buildings and plants during the past two years. The locally ownedcompany, though in re!asonable shape, could benefit from capital improvementt.

65. The export industry faced certain difficulties following theincrease in cattle prices to their present level. These difficulties arosefrom a) the short ope!rating season of 6 months; b) quota limitations onkill so that costs could not be reduced by increased output for which capacitywas available; and c) a heavy burden of taxation which had averaged US$lC perhead slaughtered over the previous 5 years and US3,l for 1962. Followingrepresentations, the Paraguayan Government has now given the taxation reliefthe companies requested. This has permitted them to retain their competitiveposition while paying producers a price fluctuating around the minimum priceof Copacar, which is at present g 14 net; per kilo liveweight. The missionwas advised that the position is now satisfactory. The gradual increase inthe number of cattle available for slaughter which would result from theproject, would permit a progressive exnatnsion of the export quota and aconsequent extension of the operating season.

- 1)4 -

V1 BENEFITS AND JUSTIFICATION

Increased Ranch Pro,duction

66. Ranch development and improved stock management and sanitationresulting from the project would increase annual stock turn off bothauantitivelv and aualitivelv. Higher calving rates. decreased mortality,greater carrying ca-pacity, and earlier turn off at increased weights couldbe expected. Production statistics for ranches under current managementtechniques are given in Annex 4. The proposed program of herd development iseiven in Annex 5W

67. Estimates of ure-development. and post development production incomeand operating costs for small, medium and large ranches are detailed inAnnpx 6. These show that twelve vears after develonment. income wouldincrease by V 1.22 million, 0 1.83 million and 0 2.45 million for the small,medium and lnroe ranchps resPAntively while rresPondinPg increnses inoperating costs would be V 0.25 million, 0 0.29 million, and 1 0.40 million. Thetotnl value of increased production frnm the 150 rnnches included i n theproject would approximate 0 238 million and total operating costs wouldincrease by about d 42 million. The increased returns would only be obtainedprogressively, reaching the target figure in the twelfth year. They do notinclude the value of the additional stock bred aand retained over this periodto build up the breeding herd to the appropriate size. Calculations, ndiicate t1h.at bo.rrow,..,ers sho ,ld be abl to meet t+he nm-ortisation. of their

loans following the grace period of four years, from the increase in their

E;~ iL0 J LIconor-4c BDE-iePnf4ts

00. ±I1 ~ Uit VdUCLt: J.L JLIUL-cdAjLL UlilUa.LL . PI-UUUILU.±L1 WOU..L 'L4b56P, The gros U<iu of1 craelrua pocon io-ul risprogressively to a maximum of ' 238 million in the twelfth year followinginlvestmen7t The net value of the 3nicrea3e in a-nnual production would be0 196 million. Allowing for the <development period of 12 years afterinvestmentt and computing the annual net benefits over the lifetime of theproject -30 years - the average annual return to the economy at farm priceswo-uld be alout iL4 per cent. As most of the additional production would beexported in the form of canned beef the returns would be substantially inthe form of' foreign exchange earnings.

Vi. CONCLUSION±S ANi) _RECOUV1iADATICN

69. Livestock raising constitutes Paraguayts major single industry.Until recently its development has been stifled by price and other controlsexercised by the Corporacion Paraguaya de Carnes (Copacar) which thoughnominally a co-operative of livestock producers was for all practicalpurposes a Government monopoly. Substantial relaxation of these controlsrecently, effected especially by the now decree law no. 710 wtichregulates the organization, functions and powers of Copacar and by thecurrent application of the powers still remaining to Copacar, has howeve!rconsiderably improved the position of the industry. There now exist,

- 15 -

conditions which give some encouragement for the industry's development,provided the decree law no. 710 is observed and no new restrictionsprejudicial to the welfare of the industry are imposed.

70. The project would be the first stage of improvement in theeconomics of cattle production through the application of recognizedproven modern techniques. The returns on the investment would besatisfactory and the Paraguayan export income would benefit. The projectwould improve the competitiveness of Paraguayls beef production, andshould assist the country in expanding its exports.

71. There is a strong demand for long-term development loans byranchers desirous of improving the productivity of their holdings and themanagement of their herds. The proposed administrative arrangements forhandling of loans are soundly based. T'he NDB has had experience in theservines it is nronosed it should nrovide and should be canable ofcarrying out its responsibilities satisfactorily.

72. The project is sound and economically justified. It is suitablefor an MA Dervelopment Gredit of UTT.R ' million equivalent.

December 4, 1963

ANNiEX 1

RANCH SIZE DISTRIBUTION

Size Range Number Total Cattle*hectares million

O - h99.9 147J.475 1.264500 - 46,999 6c6 o.794

5,000 -19,999 390 0.96720,000 - up 143 1.487

Tot,O 149h661, X, 512

* Cattle statistics are based on declarations by cattle ownerso f n -LimlMr-s h;ld , w.hich are delibAerat-ely und-le r statC- l-ed-. It-u is-generally considered that actual numbers are at least 25 percent higher, or that the total herd is 5 millioLn head ormore.

ANNmEX 2

PROGR±AM OFt LILJrENTvIt

Ranch Development

Pre-development Post-development(12 yrs.after invesuT)ent

Size of Unit, Small Medium Large Small Medium Large

Number of Units 80 50 20 80 50 20Number of Cattle 2,000 3,000 4,000 3.,400 5,,000 6,700Area ('000 ha) 10 15 20 10 15 20Subdivisions 4 6 8 10 15 20Fencing (km) (new) - - - 50 75 100Water Dams or Tanks 2 3 4 5 8 10Drinking Places 4 6 8 10 15 20Corrals 1 1 1 2 2 2Baths or Dips - - - 1 1 1

Herd Composition

Small Group Medium Group Largo Group

_________ Pre Post Pre Post Pre Post

Calving Percentage 50 60 50 60 50 60

Cow herd 58o 870 870 1I,05 1.160 1.7L0Calves branded 290 522 435 783 580 1,044One year (mixed sexnR) 282 5n6 )l23 760 '6h 1-012Two year (mixed sexes) 276 493 414 740 552 986Three year ( sexs) 273 4188 )i0 732 54Q6 976Four year steers 135 244 204 366 272 488Four year heifersi/ - 70 - 105 - IhoCull cows 105 150 158 225 210 300

Total 1,941 3,343 2P914 5,016 3,884 6,686

1 / Annaiil sale henrd f su. Plus 4Var e. not 1 calfo " not. ri ~ ' -A , equire d

for inclusion in cow herd.

A'.NJEX 3

RANCH DEVELOPMENT COSTS

(Million Guarani)

Size of Unit Small Medium Large

Fencing 2.00 3.00 4.00Dams and Tanks 0.75 1.25 1.50Drinking Yards 0.30 o.45 o.60Corrals 0.30 0.30 0.30Dips and Spray Baths 0.30 0.30 0.30

Total per Unit 3.65 5.30 6.70

Number of Units 80 50 20

Total all Units 292.00 265e0o 134.00

Grand Total 9 691.,(Xo million (US$5.5 million)

Basis of Cost Estimates

Fencing - X 4,000 per 100 metres

Corrals =d 3i0 pe inc

D)ip oc r Spray~

Baths - $ 300,000 per installationDams or Tanks - $ 250,000 per installation

Drinking Yards - $ 50,000 per installation

ANNEX 4

MPE-DEVELOPIENT PRODUCTION STATISTICS

1. Cal-ving percentageBorn 53% Range 45-75%Brandedl 50% (9 months) Range 'o-7O)%

2. I-iortality 1 - year 3 %2 - year 21 %3 - year 1I4 - year 0.2%Cows 2 %

3. Age at slaughte:rSteers 41 years (Range 4-8 years)Cows 6 " ( " 4-11 " )

4. Liveweight at sLaughterSteers 380 kilo - Range 300-500 kiloCows 320 " - " 280-40() "BuIls 400 " - " 360-500 "

5. Percentage take.-off OnOn total stocks 10 - 12%On cow herd 30 - 40

6. Labor used2,000 head - 6 men3,0°0 " - 8 "4.,ooo - 10 "

7. Wages (monthly)Overseer L.000 ¢BoLudary riders 3,000 %Peons 2,300 MHandy rnan 2,300 g

8. Rations2,000 D per man per month

9. SanitationAftDsa 37 % per headCarbuncle e I d "Black leg 5 dDrenlcheIs 10 d per headDips 10 l "Sn+vr adnnmnl 9r0d it It

10.4 Horses4i per rnan; maintenance 400 X per head

AINNEX 4T(age 2)

11. Marketing costs Transport 150 - 200 % per headTaxes - 200 0 " "

12. PricesSteers 14i per kiloCows and heifers 12- i " "

Bulls 132 X " "

R'ation cattle 4,000 / per head

Hides 240 $ each

Horse hair andtallow 1 $ per total

head cattle

ANNEX 5

HEIM DEVELOPMENI' PROGRAM

a) Goal is to increase size of cow breeding herd by50 per cent.

b) This would be possible through breeding by liftingeffective calving percentage from 50-60 per cent.

c) All heifers bred wil-L be retained for this purposeuntil objective is achieved.

d) Cow herd must remain static until fifth year whenfirst c-ron of extra heifers calve down.

P) Target herd siep will be: rpeahed by the ninth year.

f) Glull COW sa will remain static until this ti me

D) Steer sales .i.ll remnain sa ic p ntil fifth year whenfirst crop of extra steers become available from

in e ce. Nm.ers of ths .mustremain constant until ninth.year.

h) In ninth year, steer numbers increase again from extracow nubers and 4 continu t-o% 4increas- untn l +i1reaching maximum in twelfth year.

i) Surplus heifers become available for sale in ninthyeare nuubter-S incriea.Ise tLU1UC1l-ly Uo maxilr,-LIM. at

twelfth year.

j) Cow herd is maintained at constant level after ninthyear.

n.: ul-± COWS sold lncras at ninth year.

AtINEX 6

ESTTIvAl'ES OF PPODUCTION. :[NCOME AND OPERATING CO,STS(pre-development and Twelve years after Development Investment)

( 1000 t(?

S l,MlzTARVY

Farm Sie S~~mall Medium.Lau

_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~D F* Ps_PrPo+ Pen Post

Tncom-.a

St- e e rs 69 n1 1 ,38 1 ]37 23,79 1,3823 2, 770

L)7J.7L_ .L ,)~.A) j~, V..JI C.v7_, ,V , I I

Cows and surplus heifers 399 891 597 1,337 798 1,781Buls- 1/ 69 86 103 'I29 -138 1 72DUJ.1W LU7 uuJ JAJ.? -Lr7 I

Bation cattle 60 72 90 108 120 14T1': A 11 1'7 oe '01 3 1.

±±.~ i ___ ___

10 bad. 1,230 2,452 J.8uL4 3Ulu 2,4U6 L4,7\)90

Expenditures

Wages 186 241 241 296 296 368Rations L445 192 192 240 240 288Horses 10 13 13 16 16 18Sanitation 30 100 45 15u 60 200Transport 48 70 72 105 72 139Land tax 30 30 45 45 60 60Bulls 60 100 80 12( 90 156Other 36 50 50 60 80 90Balance-Net farrm profit 686 1,656 2ao6 2,646 1,546 3,590

Total 1,230 2,452 1,844 3,678 2,460 4,903

Investment 3.65 million $ 5.35 million A 6.70 million AIncreased return 0.97 million $ 1.54 million $ 2.04 mil:lion $

Progressive Gross Income over Development Period( million $ )

Farm Size Small Medium Large

First four years 1.2 1.8 2.4Second four years 1.7 2.55 3.4Ninth year 1.8 3.7 3.6Tenth year 1.95 3.95 3.9Eleventh year 2.15 3.2 4.3Twelfth year 2.45 3.67 4.9